Question: Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:
|
Year
|
1
|
2
|
3
|
4
|
5
|
|
FCF ($ million)
|
54.2
|
68.2
|
77.5
|
75.8
|
81.3
|
Thereafter, the free cash flows are expected to grow at the industry average of 3.8% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.5% :
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $294 million, and 37 million shares outstanding, estimate its share price.